Despite budget sops, EVs may find few takers yet

  • High initial cost and lack of infrastructure are major hurdles to EV adoption in India
  • One of the downsides of owning an EV is that you may not be able to use it for a distance of more than 100km

Disha Sanghvi
Updated18 Jul 2019, 01:34 PM IST
Chennai-based Arvind Sivasundar and his wife Nrutya Subramanyam have been using electric vehicles for eight years now.
Chennai-based Arvind Sivasundar and his wife Nrutya Subramanyam have been using electric vehicles for eight years now.(Sai Sen/Mint)

For Bengaluru-based Shubham Jain, 23, switching to an electric vehicle (EV) from a petrol car with an internal combustion (IC) engine (found in almost all cars, buses and motorcycles) has brought down the cost of daily commute considerably. The monthly commuting cost for Jain, who drives about 50km every day, has come down from 7,000 (fuel cost) to 1,500 (extra electricity bill), roughly. “I spent a lot on fuel earlier. An IC engine is undoubtedly more powerful but for commute within city limits, it does not have an edge over an EV,” said Jain.

The demand for EVs is catching on, especially among those who care for the environment. According to a report by Autocar India, an automobile magazine, the sale of four-wheeler EVs rose to 3,600 in FY19 from 1,200 in FY18 and the sale of two-wheeler EVs spiked to 126,000 in FY19 from 54,800 in FY18.

In keeping with the trend, the government gave it a push in Budget 2019 by announcing some incentives. The government has lowered goods and services tax (GST) on EVs from 12% to 5%. It has also announced an additional tax deduction of 1.5 lakh under Section 80EEB of the Income-tax Act on interest paid on loans taken for buying EVs. If you claim the entire deduction of 1.5 lakh per annum for a tenure of five years, you will save around 2.34 lakh ( 46,800 per year) if you’re in the highest tax bracket of 31.2%. The budget has also made an allocation of 1,000 crore for setting up EV charging stations.

But are you ready to buy an EV yet? If you are two in minds about its cost and feasibility, we have got you covered. Read on.

What works

Arvind Sivasundar, 43, has been using an EV for eight years now. His first EV was the Reva, which he bought for 5 lakh. About three years ago, he upgraded to a Mahindra e2o, which cost him 7 lakh. “I made a repeat purchase because I was happy with the performance and convenience of a small electric car,” said Sivasundar, a Chennai-based doctor, whose car runs on solar energy. “Fossil fuels are going to run out eventually. Why wait till that happens to move to a more sensible option? I installed a 3-kilowatt (kW) solar plant at home three years ago; so basically my car runs on sunlight,” he said.

The low cost of maintenance and charging is what attracted Jain and Sivasundar to an EV. Jain managed to cut his daily commute cost substantially, and also save on maintenance cost that he used to spend on his petrol car. “If the vehicle is driven properly then you will require no additional investment,” said Jain.

Sivasundar said it takes about eight units of power to fully charge his EV’s battery and since there are fewer parts in the vehicle compared to an IC engine, wear-and-tear is minimal. EVs usually require a change in battery after five to six years, which costs upwards of 1.5-2 lakh.

According to Gaurav Vangaal, senior analyst, vehicle production forecasting, IHS Markit, a global information provider, some states offer incentives to EV buyers. As of now, all electric vehicles are exempted from payment of taxes to the government of Karnataka, while Delhi has waived off road tax and registration charges.

For this reason, Sivasundar bought his EV from Bengaluru. “Karnataka gives a subsidy of about 1 lakh. But entry tax to this state plus cost of re-registration and cost of transporting the car from Bengaluru to Chennai came to almost 80,000,” he said.

Though select insurers cover EVs, the rates are cheaper for them. “In the revised third-party ratings (released by the Insurance Regulatory and Development Authority of India), for an EV more than 65 kW, the premium is 6,707, while for an IC engine above 1,500cc, the rate is 7,809,” said Abhishek Bondia, principal officer and managing director,, an insurance aggregator.

What doesn’t

But all’s not hunky-dory when it comes to buying EVs. One of the biggest downsides of an EV is the fact that you may not be able to travel between two places that are more than 100 km away. Jain said his EV requires to be charged for four to five hours for distances up to 100km and there aren’t many charging stations available in Bengaluru except in a few malls. “Another problem is that the mileage drops to around 60km if you choose to turn on the air conditioner and lights,” said Jain. Sivasundar too refrains from taking his EV outside the city because his car doesn’t go beyond 90km on full charge and it’s difficult to rely on the few service stations available in Chennai. He keeps a second car, which has an IC engine and runs on petrol, primarily for outstation travel or emergencies.

While the government has proposed to convert 500 km between Delhi and Agra and Delhi and Jaipur by March 2020 into an EV-friendly corridor, the current available infrastructure is not inspiring. “The EVs that are on road today cannot travel over a maximum of 100 km; so someone who travels between Delhi and Noida or Delhi and Gurugram frequently will not buy an EV because there are no charging points on the highways yet,” said Parthaa Bosu, an environment expert and chief executive officer, Domain and Functional Advisory, an environment consulting company. Also, the few chargers available in some metros could take about eight hours to charge the battery.

The lack of infrastructure also means EV owners need to have a dedicated parking space with a charging facility.

The high initial cost is another roadblock in EV adoption. “Our EV plan requires some more practical thinking. Hyundai has launched Kona which costs 20 lakh-plus and definitely doesn’t cater to the middle income group. Toyota Prius which is a hybrid is currently available in the market. The car actually costs about 8 lakh but because of the customs duty and other taxes, it costs 30 lakh and same is the case with Kona,” said Bosu.

Since most EVs are imported, the taxes are high which add to the overall cost. “Even high-income individuals would rather go for a Tesla or a Mercedes than spending so much on an EV,” added Bosu.

The cost of replacing the battery too may burn a hole in your pocket. “The major downside is your battery pack, which is quite expensive. It might be so expensive that you may want to get back to an IC engine car at the time of battery replacement. Hence, a first-time EV buyer may opt to switch back to the IC engine,” said Vangaal.

“Even though EVs are cost-effective, as a country we are lagging behind in terms of infrastructure and options for EVs. I’d suggest one to wait and watch how the automobile industry moves forward in this space,” said Basavaraj Tonagatti, Sebi-registered investment advisor and certified financial planner.

Though the government wants only EVs to be sold by 2030, as of now, buying an EV may make little sense for everyone.

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First Published:18 Jul 2019, 01:34 PM IST
HomeMoneyPersonal FinanceDespite budget sops, EVs may find few takers yet

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